Holiday Pay

How should an employer calculate holiday pay for a seasonal worker with a year round contract ?

The Supreme Court has ruled on this long running issue in the case of Harpur Trust v Brazel.

Ms Brazel worked as a part-time music teacher under a zero hours contract. She did not work every week and she was only paid for the hours that she taught during term time.  She had a contract throughout the year (known as a part-year worker) and the school accepted that she was therefore entitled under the Working Time Regulations 1998 to the full-time equivalent of 5.6 weeks’ annual leave, to be taken during school holidays.

As the school year varied between 32 and 35 weeks a year, the school calculated her holiday pay using the ‘percentage method’ at 12.07% of hours worked in a term (12.07% being reached by dividing 5.6 (full-time equivalent) by 46.4 (the total number of weeks in a year less the 5.6 weeks’ holiday). This resulted in her holiday pay entitlement being lower than if her holiday pay had been calculated by averaging her normal rate of pay over the 12 weeks prior to the holiday being taken.

The school argued that calculating Ms Brazel’s  holiday pay using her average weekly earnings over the 12-week period immediately before her holiday was taken (WTR, reg. 16 and s. 221-224 of the Employment Rights Act 1996)  would result in her receiving proportionately more holiday pay then a full time employee and would therefore be unfair.

The Employment Tribunal initially agreed with the school, but this was overturned on appeal at the Employment Appeal Tribunal.  The Court of Appeal dismissed the school’s appeal who then appealed to the Supreme Court.

In the authoritative decision on this, the Supreme Court unanimously rejected the school’s argument, noting that nothing in the Part-Time Workers Regulations prohibited part-time workers from being treated more favourably than someone working throughout the year.

Commenting after the case Michael Ford QC  stated

‘The case is important for the leave entitlement of every worker in the UK. Had Harpur Trust’s arguments succeeded, employers, workers and tribunals would have faced the spectre of needing to determine the hours worked by every worker to calculate the annual leave entitlement. … Instead, after Brazel every worker receives the same, fixed’

In Conclusion

This case reminds employers that calculating holiday pay can be complicated where employees do not work standard hours. Whilst a desire for fairness is commendable, the correct method of calculation of weekly pay for a ‘part-year worker’ is as set out in s224 Employment Rights Act 1996. Weekly pay should be calculated as an average of the most recent 12 weeks’ of earnings prior to the start of the leave period, ignoring any weeks where earnings were zero (e.g. school holidays in this case).

Please note that this advice is general in nature. As an MILS member you have access to the MILS Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.